case law

id : 20232

id: 20232

Supreme Court judgment

dated 13 December 2006

Case No. II CSK 289/06

Summary by arbitraz.laszczuk.pl:

In 1999 M.T. Sp. z o.o. entered into an agreement with a local commune under which the parties would establish a professional sports team. The founders’ agreement included an arbitration clause covering disputes that might arise in relation to the founders’ agreement.

The parties established a joint-stock company to operate the sports team and took up registered shares in the company. Under the founders’ agreement, M.T. bought out professional contracts and licenses and certain claims and assumed certain liabilities related to an earlier sports club.

In 2003, alleging that the commune had not lived up to its obligations under the founders’ agreement, M.T. obtained an arbitration award against the commune including restoration of consideration M.T. had provided, including the value of the shares it had taken up and other forms of consideration, plus lost profit, totalling some PLN 10 million.

The regional court set aside most of the award in 2004, finding that the award was unclear and violated public policy. It ruled on matters that were beyond the scope of the founders’ agreement, which was regarded as a form of preliminary agreement, and thus beyond the scope of the arbitration clause. In addition, the portion of the award purporting to unwind the claimant’s taking up of shares in the company was unenforceable because this could be accomplished only pursuant to the provisions of the Commercial Companies Code.

On appeal, the appellate court upheld the order of the regional court setting aside portions of the award, but on somewhat different grounds. The appellate court also found that the award was unclear and violated public policy, holding that the arbitration court had no jurisdiction to rule on claims for restitution of the amount paid for the shares or for lost profit. It also held that the arbitration court, as a state body, had failed to comply with constitutional principles of fair trial.

On cassation appeal, the Polish Supreme Court held that the arbitration court is clearly not a state body. It also held that the appellate court had not explained sufficiently the grounds for its finding that the respondent in the arbitration proceeding was denied a fair hearing. For this reason, the Supreme Court remanded the case to the appellate court for reconsideration.

Excerpts from the text of the court’s ruling:

1. The arbitration court is subject only to the provisions of the Civil Procedure Code that govern procedure before the arbitration court. For this reason, a violation of general provisions of civil procedure law or overriding principles of civil procedure may serve as grounds for setting aside an arbitration award only if it results in violation of fundamental principles of the legal order of the Republic of Poland or principles of social coexistence.

2. A violation of the rule of law or principles of social coexistence as referred to in Civil Procedure Code Art. 712 §1(4) must be part of the content of the ruling itself, and thus it is insufficient if the violation occurred in the proceeding before the arbitration court.

3. If the arbitration court ignores evidence offered by a party because the arbitration court deemed the evidence unnecessary, that will not be regarded as depriving the party of a defence. The state court’s review of whether the arbitration court correctly found the evidence to be unnecessary would constitute impermissible intrusion into the merits of the case.

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